Let’s assume that Greece negotiates a repayment rate of say 4% on a residual debt of approximately 230 billion Euros.

If we use the IMF’s own projections of economic growth, the Greek government will somehow have to run its economy with a primary budget SURPLUS, merely to maintain its debt burden, that is to say say, keep it stable – and that does NOT include the interest payments.

In the last 25 years, Greece has only managed to run a surplus in SIX  of those years – and those were years of economic growth.

It is obvious therefore that Greece will have to look at the other side of its Balance Sheet in order to cut costs even more – because it will have to cut its present deficit by about 10 billion euros per year.  That is roughly the equivalent of  a 60% cut of its current spend on social programmes.

There are only FOUR main factors which are functions of a country’s solvency: Fiscal Policy, Growth Rate, Interest Costs and the Debt Load.

So, once Greece has negotiated THIS temporary fix, its first stop has to be its fiscal policy. Unfortunately, it looks as if the Eurozone is headed for a German-style one-size-fits-all integrated fiscal policy – which may suit Germany but certainly NOT Greece or even its cousin-in-debt,  Portugal.

Portugal is currently not in line for debt relief but if the Eurozone allows the Portuguese problem to drag out for as long as they allowed the Greek problem to fester, it will become more-or-less a Carbon-copy of Greece. When that happens and after it has negotiated its own partial default, Portugal too will have to run a surplus of about 3% – something that it has not done for about 15 years.

Debt-relief is never a solution but can be a new start but the follow-up needs to be a new fiscal policy which promotes immediate growth. Draconian Euro-rules preclude that.

Unfortunately a new start is only useful when a country has sovereign control over its fiscal and political affairs.

In the Eurozone, that has been consigned to history.